JPMorgan ignored risks, fought regulators: Senate

Fri Mar 15, 2013 7:07am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Aruna Viswanatha and Emily Flitter

WASHINGTON (Reuters) - JPMorgan Chase & Co (JPM.N: Quote) ignored risks, misled investors, fought with regulators and tried to work around rules as it dealt with mushrooming losses in a derivatives portfolio, a Senate report alleged in a damning review of the largest U.S. bank's management.

Senior managers at the bank were told for months about the bad derivatives bets that ended up costing the bank more than $6.2 billion but did little to rein them in, according to the Permanent Subcommittee on Investigations report on Thursday.

The Senate report came on the same day the U.S. Federal Reserve separately asked JPMorgan to improve its capital planning process as part of an annual "stress tests" of banks.

The barrage of bad news for JPMorgan, long seen as the safest and best-managed U.S. bank, could taint the reputation of the bank, as well as Chief Executive Jamie Dimon. Dimon has been one of the most outspoken critics of Washington's attempts to tightly regulate Wall Street after the 2007-2009 financial crisis.

The report also gives ammunition to advocates calling for stricter financial reform regulations. In particular, the 301-page Senate report will likely give new energy to regulators crafting the Volcker rule, which proposes to put limits on banks betting with their own funds.

A JPMorgan spokeswoman said, "While we have repeatedly acknowledged mistakes, our senior management acted in good faith and never had any intent to mislead anyone."

Committee sources said the losses from the trades appeared to total more than $6.2 billion. But these sources said they could not determine how much because the trades originally made by the bank's Chief Investment Office were moved to other parts of the bank. They said JPMorgan declined to provide them more information about the values of the positions.

The Senate subcommittee will hear directly from senior JPMorgan executives - but not from Dimon - at a hearing on Friday morning on the derivatives bets that came to be known as the "London whale" trades.   Continued...

The entrance to JPMorgan Chase's international headquarters on Park Avenue is seen in New York October 2, 2012. REUTERS/Shannon Stapleton